The Equity Analyst Team is a student organization within the Johns Hopkins Carey Business School. This exclusive investment management organization is designed to create graduate students that bring both hands-on experience and theoretical knowledge to their future employers. The members are hand-picked, interviewed, and put through a rigorous program.

Monday, October 3, 2011

Morning Call Topic - New Members Join the Call

Banks Plan New Fees for Using Debit Cards

Q1 "The industry says it needs the fees to recoup revenue it will lose because of new government regulations taking effect." What are the related new government regulation? What is the impulse behind the new regulation?

Q2 Why does the Federal Reserve Board charge and increase the swipe fee for debit cards? Even we ignore the influence to the bank industry, it seems this action will discourage customers' spending (especially for those without a credit card), which is obviously not good for economy recovery, isn't it?

Q3 Bank of America has already disclosed on Thursday in a memo that it intends to charge a $5 fee each billing cycle in which a customer uses a debit card to make a purchase next year. And its planned $5 fee is higher than what most other banks are testing or planning to charge. Why did they make this decision? Even though most banks may raise their service fees sooner or later, a higher fee than others may still increase risks of losing customers? In addition, other banks are still testing this fee limited in a few states, but BofA will start to collect the fee nationwide from next year. Any projections of potential influences for its business? Opinions? Comments?

Q4 Several other large banks, including J.P. Morgan Chase & Co., Citi Group, and Wells Fargo & Co., are testing or plan to charge similar fees in some states. What are the potential influences to the bank industry? and the economy?

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The opinions expressed here are solely that of the author. This is not intended to be relied up as a forecast, research advice, recommendation, or solicitation to buy or sell any securities. The opinions expressed are as of the date above and are subject to change. The information is derived from sources deemed to be reliable, and are not guaranteed as to accuracy. The information contained in this paper is based upon or derived from information generally available to the public from sources believed to be reliable. Past performance is no guarantee of future results. Reliance upon information in this material is at the sole discretion of the reader.